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Home | Real Estate Blog | Articles | Video | Forum | Success Goal | 中文
Singapore Real Estate Market Review November 2010
Asian countries have made considerable achievement in economic growth this year remaining the only hope and point of reference for western countries whose economies have not yet recovered from the sub- prime mortgage caused crisis that spiraled from USA in 2010.Though most economies have stabilized a growth momentum will not be achieved in the remaining 4Q 2010 unless the government stimulus packages bring the desired results which may not happen until 2011.
Most property market watchers have been waiting with anticipation the release of the 3Q figures to confirm the already known fact-prices of properties are on upward trajectory- and the statistics released by the Urban Redevelopment Authority show an upward trend of prices across all sectors of the market but moderated when compared to the 2Q.
A closer look at Singapore real estate figures confirms market analyst’s predictions that the prices will move up for most of the year. Private residential homes continued with the price increase registered in the last three quarters of 2010, when measured q-o-q prices of private residential were up by 2.9% in the 3Q 2010 this is moderate growth in the 3Q compared with the 2Q when prices were up by 5.3% this could be as a response to the measures put in place by authorities to cool the markets.
As seen in the last quarter office space has experienced an increase in price as companies register head counts and seek for space to accommodate more staff. Significant head count has been registered in the financial sector with major multinationals setting- up offices in Singapore in order to take advantage of the good prevailing economic growth. The office space registered 6.2% increase in prices in the 3Q 2010 significant increase in prices was in CCR as this area is well served by all the necessary infrastructure and most potential office tenants always look for this before buying the property.
Shop space prices remained relatively stable in the 3Q going up by 1.3% as compared to the last quarter measured on q-o-q bases. It is not clear why shops prices have not gone up like office and industrial but could be due to the preference of potential buyers who see office and industrial as showing more promise and these investors expect these two sectors to achieve significant price increase by the year end.
Industrial properties prices were up by 8.3% in the 3Q of 2010 this is in line with the expectations of market analysts as most believe that the sentiments in the manufacturing sector has moderated in the last two quarters. A pent-up demand will however support the price increase as most firms are on the look out for industrial spaces as they resume expansion plans.
Rentals remained strong in the last quarter and recorded moderate growth across all sectors. Private residential property prices went-up by 3.6% in the 3Q 2010, this is despite the spirited effort by the government to bring prices closer home with a raft of rules and measures intended to cool the property prices and curb speculative tendencies. As long as demand is high the rentals will also be moving up as landlords expect to make tidy sum form the rented properties.
Shop space rental performed marginally well moving up by 0.8% despite the slower increase in prices this could be explained as supply side cause as most properties coming up limit the number of shops available for selling and letting. As prices remain stable and the current demand for shops remain unchanged analysts expect more stable prices and rentals for this sector in the remaining 4Q 2010.
Office space continued with price and rental increase achieving 6.0% increase in rental in the 3Q 2010.This was due to the prevailing economic performance which instilled a sense of confidence in the market and firms have expanded their operations bringing positive sentiments in the market. As expected more supply in the pipeline and launches could moderate the increase in the prices, but this has been seen as a result of the free market dynamics rather than any speculative tendencies.
Industrial rentals increase was in the positive territory with a commanding 4.8% increase measured q-o-q. The growth in rental was moderate compared to the 8.3% growth in prices in the same sector; more investors are willing to buy resulting in increased demand but the prices have remained high making most investors opt to rent.
Going forward in the last quarter of 2010 the supply in the pipeline and new launches will influence the direction the prices and rentals take. As the authorities had planned in 3Q 2010 64,358 units for residential use were in the pipeline this is a significant improvement from the previous registered units. However almost half of the units had not been sold as 4Q started but the projects could be completed well before the deadline as demand for these units is still high and the authorities would want a situation where supply matches demand to prevent price hikes in the near future.
The office sector has seen flurry of activities as it represent opportunities for investors and most buyers remain optimistic that prices will be stable unlike the residential sector. In the 3Q a total of 887,000 Sq m GFA of office space was in the pipeline. This figure comprises some 36,796 sq m converted form residential to office and 762,000 sq m that will be delivered by the government and private developers between now and 2013.
Although the market is responding to the tight measures put in place by the government the overall prices increase have reduced in the 3Q as compared to the high prices increase witnessed in the 2Q. A comparison of the 3Q and 2Q reveal a general cooling of the market.
A case in point is the prices of non-landed properties which are the main target in the government effort to bring prices home. Prices in this sector increased by 1.6% in 3Q a moderation from the high of 5.0% recorded in 2Q. Even the luxury sector prices did not increase by significant figures, an increase of 3.1% was achieved in apartments and 1.1% in condos.
Based on areas, those properties that are closer or in Core Central Region, out performed all other areas this is because it is always a preserve of most of the influential buyers who want just the best properties. Prices of landed properties where most permanent residents and foreign buyers had shown appetite for showed resilience going up by 7.7% in the 3Q compared with the 6.2% recorded in 2Q. This segment has seen an increase in activities as buyers seek alternative ways to invest but given the condition of land ownership and the scarcity this q-o-q prices increase in this segment will continue to be seen.
A moderate decline in the rentals increase in the private residential have been noted as partly 3.6% increase was registered in 3Q as compared to the 5.9% increase that was achieved in 2Q 2010.
The government effort to increase the supply of units has seen Government Land Sale (GLS) Program achieve significant activity, with over 18 sites released for private and pubic housing that can supply about 14,000 units per year. This could alter the market as it is significantly above the over 6,000 units earlier sold under the GLS program in the 1H 2010.
The developers had a moderate launch activity in 3Q with 3,501 private residential homes put up for sale, this was a decline from the 4,180 homes launched in 2Q 2010. However, given the prevailing market prices more activity is expected from this group in the coming months.
Pre-sales activity has caught ground and in 3Q 3,561 private residential homes changed hands, these units are expected to be completed in the next few months. The units sold were less by 394 units from the 2Q sales figure. The decline in the sold homes in 3Q could be as a result of the high prices seen in the beginning of the 3Q but as the government introduced the anti- speculative measures the market has responded in a positive way though most of the indexes have gone south.
In the months to come government and developers will be taking stock in order to move the expected units before the end of the year. As seen in the figures for 3Q the market is on a cooling trajectory but demand for homes, office and Industrial spaces remain healthy. The economic growth remains on course to achieve 13- 15% growth and this will be a crucial remainder to investors and home buyers to take advantage of the opportunities currently available as no significant price reductions are expected in the near future.
In the coming months new methods of building homes may also influence the market direction. As seen, there is a shift of converting some residential units to office units, some developers may buy older blocks of apartment in order to build latest block of units this may add to the cost of development but may also prove to be an opportunity that was ripe for trial.
Buy, Sell, Rent, Invest, In Singapore
Billy Chen
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